ICAEW.com works better with JavaScript enabled.

Apprenticeship levy

From April 2017, the way that the government funds apprenticeships is changing. All employers operating in the UK with an annual pay bill of more than £3m will be charged a levy of 0.5%.

How the levy will work

How it’s calculated

An employer’s pay bill is based on total employee earnings, subject to Class 1 secondary National Insurance contributions (NICs). These include employee expenses and benefits.

The levy will be payable through PAYE, alongside income tax and National Insurance. Payment will be taken monthly, in real time, so as an employer’s paybill changes each month, so will their levy amount.

"Top
"Remember

How the levy will work for levy payers

  • Although the levy is based on an employer’s full UK pay bill, they will only be able to spend their English proportion on English apprenticeship training. The Scottish proportion has not been ring-fenced for training by the Scottish Government, so this money may be lost.
  • An employer’s levy payment will be ring-fenced in the form of a digital voucher for them to use from May onwards. They will be able to manage this from their digital account. Funds can be used for tuition and assessment costs which are eligible for ESFA funding. Unused vouchers will expire after 24 months.
  • The government will apply a 10% top-up to monthly funds, so for every £1 an employer puts in, they will have £1.10 to spend.
  • What’s more, the government are offering an ‘allowance’ of £15,000 to offset levy payments – so an employer will have extra money to spend.
  • Employers can use their levy money to buy apprenticeship training for employees at all levels and ages, including graduates who may be eligible to apply for an apprenticeship programme if the subject area is different to what they have previously studied. What’s more, the money can be used to fund existing employee development, providing they meet the apprenticeship criteria.
  • If the funds in an employer’s digital account aren’t enough to cover the cost of training and assessment for all of their apprentices, the government will support them. Although the eligible costs per apprentice is capped at £9,000, the government will pay 90% of the cost of training any additional apprentices, providing that the employer pays a 10% contribution.

How the levy will work for non-levy payers

  • If an employer is not going to be paying the levy, they won’t need to use the digital apprenticeship service to pay for apprenticeship training and assessment until at least 2018.
  • However, they can start using the digital system to browse the available apprenticeship standards, approved providers and assessment organisations – and find one that’s right for them.
  • A non-levy paying employer will be able to employ an apprentice using a co-investment approach. This involves them paying a 10% contribution to the cost of apprenticeship training – which they will need to pay directly to the training provider. The government will pay the remaining 90%, up to the maximum amount of funding available for that particular apprenticeship standard.